1. Field of the Invention
The present invention generally relates to credit card products and the like. More particularly, the invention relates to systems and methods for administering a credit card account having a finance charge waiver period.
2. Background and Material Information
A credit card is a financial product that is most commonly represented by a plastic card-like member. Credit cards are generally issued by a bank and provide a mechanism by which an authorized cardholder purchases goods or services without an immediate, direct exchange of cash. With each purchase, a cardholder thereby incurs debt which he or she may thereafter (i.e., upon receipt of a monthly or otherwise periodic statement) fully pay the outstanding balance or, as a matter of necessity or choice, defer at least a portion of the balance for later payment with accompanying interest or finance charges for the period during which payment of the outstanding debt is deferred.
The spending power (i.e., the total amount of funds available to the cardholder at any particular time for making purchases and the like) of a credit card is typically limited to a particular amount (the “credit limit”) predetermined by the issuer of the card. The size of the issuer-imposed credit limit is generally based on a number of nonexclusive factors, the most important of which are often the cardholder's earning capacity and credit history. When purchases are made or debts incurred with the credit card, the available portion of the credit limit is reduced by the purchase or debt amounts. In addition, interest and/or finance charges are also subtracted from the available portion of the credit limit on a periodic basis. The total debits on a credit card are referred to as the “outstanding balance,” while the remaining or available balance of the credit limit is typically called the “available balance” and reflects the dynamically adjusted current spending power of the credit card. The cardholder may increase the available balance, up to the credit limit, by paying to the issuer (or its representative) the entire outstanding balance or a fractional portion thereof.
Credit card accounts may provide cardholders a “grace period,” typically comprising a period of 20-30 days following the end of a billing cycle. The grace period is the time period in which a cardholder may pay off new debits to the account without incurring interest charges. After the grace period has expired, the card issuer will charge the cardholder interest on the new debits. Typically, the grace period does not apply to cash advances or balance transfers.
Whether or not a grace period is used by a credit card issuer will control the way interest is applied to a credit card account. For credit card accounts with no grace period, the card issuer charges interest on purchases immediately and regardless of whether the cardholder has paid the previous balance in-full. In this case, interest calculations are based on an average daily balance including new purchases. However, for a credit card account with a typical grace period, interest is not charged on new purchases when: (1) the cardholder has paid his or her previous balance in-full; and (2) the cardholder pays a current balance before the expiration of the grace period. When these conditions are not met, a credit card issuer will normally charge interest immediately on the outstanding balance (including new charges) based on an average daily balance.
Therefore, grace periods have a significant effect on credit card billing procedures. Under most credit card administration methods, the grace period starts with the end of a billing cycle, wherein a billing cycle typically lasts 30 days. All purchases to the credit card account which occur within a billing cycle are generally lumped together for applying the grace period. Thus, for a billing cycle beginning on May 1 and ending on May 30, the grace period clock would begin on May 31. For a 25 day grace period, the grace period in this example would expire on June 24. After that date, the credit card issuer will begin to charge interest if the cardholder had not paid off all of the charges made between May 1 and May 30.